China's Producer Prices Fall for 29th Month, Deflation Pressures Persist

10.03.2025

Today's expected range for the Canadian Dollar against the major currencies:

US Dollar 1.4270-1.4480

Euro 1.5490-1.5720

Sterling 1.8460-1.8700

WTI Oil (opening level) $67.31

The CAD/USD is opening at 1.4385 ( 0.6951 )

Headlines

· The US economy added 151K jobs in February 2025, up from 125K in January but below the 160K forecast. Growth occurred in health care (52K), financial activities (21K), transportation and warehousing (18K), and social assistance (11K). Federal employment fell by 10K due to DOGE layoffs, with more impact expected from spending cuts and tariffs. Fed Chair Powell said that the central bank is in no rush to cut interest rates, but the overall economic outlook remains clouded by trade tensions and policy uncertainty.

· China's producer prices fell by 2.2% year-on-year in February 2025, slightly exceeding the forecasted 2.1% decline. This marked the slowest drop since August 2024, amid ongoing deflation for the 29th month, influenced by commodity price fluctuations and the Lunar break in January. Consumer prices fell 0.7% year-on-year in February, the first decline in 13 months versus an expected decline of 0.5%.

· Japan's nominal wages (labour cash earnings) rose 2.8% year-on-year in January 2025, below the 3% forecast and the lowest in three months. Real wages fell 1.8% as inflation outpaced wage growth. Unions demand a 6.09% pay hike, the largest in over 30 years. The Bank of Japan is expected to keep interest rates steady in March, seeking evidence of sustainable wage growth.

· Mark Carney has won the race to become Canada's next prime minister, taking over from Justin Trudeau, amidst economic uncertainty due to US Trump's trade policies. A former central banker, Carney has pledged to protect Canada's economy and sovereignty, promising to keep retaliatory tariffs on US goods until the US shows respect and makes credible commitments to free and fair trade

Key Points

· Equities: US stocks rebounded but had worst week since Sep; DAX fell 1.8%, HSI -1.82% on deflation fears

· Volatility: VIX -6.03% to 23.37, but short-term vol remains high; zero-day options 56% of SPX volume

· Digital Assets: BTC $82.7K after $600M in liquidations; Trump’s crypto reserve order failed to boost sentiment

· Currencies: Euro shifts to so-far shallow consolidation after historic week.

· Fixed Income: Japanese yields post new highs, Historic week saw German yields close over 40 basis points higher last week.

· Commodities: Weak China data compounding a weak outlook for crude and metals

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